5 questions with Peter Relan

A million dollars can go a long way in the Internet startup world these days.

Just ask Peter Relan. The former Oracle executive and Webvan CTO launched the incubator YouWeb with an investment of less than $1 million and a model he calls “the next generation of microfinancing.” Backers of the Burlingame, Calif.-based incubator include David Roux, co-CEO of Silverlake Partners, and David Whorton, founder of Tugboat Ventures.

YouWeb’s highest profile startup is social gaming company Crowdstar. The 17-person company’s biggest hit, Happy Aquarium, is a virtual fish-raising game and has more than 28 million monthly active users on Facebook, according to AllFacebook.com. Across all games, CrowdStar has more than 41 million monthly Facebook users.

Relan says Happy Aquarium is bringing in about $1 million a month selling virtual fish- and fish-related goods. Other games include Happy Pets, and to keep traffic up, Relan says, the company plans to launch a new game every month. Relan spoke recently with PE Week Senior Editor Joanna Glasner.

Q: How is your incubator different than others?


YouWeb does not actually invest in companies. We have an entrepreneur-in-residence program, where we invite brilliant technologists who do not have a business plan or a team. We meet with about 10 people a month, and hire three or four a year. We give them a one-year, no obligations job. We are investing in an entrepreneur in the rawest form. They come to the office, they do whatever they want. But it’s not a high salary because we want them to feel that hunger.

Q: Are you considering providing venture funding to Crowdstar?

A: Every venture capitalist is beating down the doors to invest in Crowdstar. What is the value add for us? We don’t need to provide liquidity to anybody. I’m looking for someone who gets the space and can help grow the company.

Q: Did the fast growth come as surprise?


When we launched Crowdstar, we said we’re going into social gaming. At the time Zynga Game Networks had Mafia Wars, so we decided to do a battle game called WWII. It was our first product that had virtual goods in it, and we were amazed that people actually pay money for a picture of a battle ax or a tank.

Then we commissioned a game called Save the Reef, followed by Happy Aquarium, which we built in six weeks and launched it in early September.

Q: What are your plans for social gaming?


We plan to do one game a month. Also, we spun out Aurora Feint, a social gaming network on the iPhone. And we also launched Sibblingz. It’s a game engine to allow you to build a game across iPhone, Facebook and the Internet. Independent developers and companies can use it.

Q: What other sectors interest you?


Mobile e-commerce. We have two incubations in that space. We saw that 19% of Christmas shoppers used mobile phones to assist in physical shopping. In two years, you’ll have your smartphone and use your camera to point it at something, say a car, and it will say, for example, “BMW 350.” The mobile will become a perpetual window through which you look at the world. The field is called “augmented reality.” You point your smartphone at reality and you get augmented information, enabled by image recognition.